Chicago FHLB Offers 'Servicing Released' Option on MPF

The Federal Home Loan Bank of Chicago is expanding its Mortgage Partnership Finance (MPF) product line for Fannie Mae-eligible loans by offering a 'servicing released' option for the first time.

Currently, FHLB member banks and thrifts participating in the MPF Xtra program have to retain the servicing rights on loans they originate.

"It will allow more members to have access to that product," said Eric Schambow, senior vice president and director of the MPF program.

The Chicago FHLB acts as a funding conduit for all the Fannie-eligible loans. MPF Xtra loans are sold to Fannie. (The standard MPF loan product, which has a risk retention feature, is not sold to Fannie.)

The servicing released option is still being rolled out, Schambow said in an interview. "We have members that are signed up for it, but no deliveries yet,” he said.

As of Sept. 30, the Chicago FHLB had purchased $8.3 billion of Fannie-eligible loans since the MPF Xtra program was launched in late 2008. MPF Xtra loan production in the third quarter of 2011 totaled $768 million.

Members of the Chicago FHLB originated 64%, or $494 million, of all MPF Xtra loans funded in 3Q11.

The Boston, Des Moines and Pittsburgh FHLBs also offer the MPF Xtra product line to their members. The Chicago FHLB aggregates all the Fannie-eligible loans, allowing smaller lenders to get better pricing. The Chicago bank also acts as the master servicer for those Fannie loans.

This gives Fannie a direct relationship with the Chicago FHLB in lieu of managing counter party risk with hundreds of smaller institutions.

The Chicago FHLB senior vice president also noted that the Chicago Bank is willing to work with other investors besides Fannie Mae. "We would be interested in talking with any investor that is interested in working with us," Schambow said.

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